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Dear Liz: I’m a single mom with three kids. My mortgage is $1,700. My other monthly bills include $355 for a car loan, $755 for school tuition, $350 for utilities, $790 for credit cards, $200 for gas, $208 for braces and $235 for a 401(k) contribution. This leaves no money for food. I get no child support. How can I pay down my credit card debt? I don’t have any money for a baby sitter or I could get a second job.

Answer: The way you pay down credit card debt is by reducing expenses and increasing income to free up extra cash. If that’s not possible, you may need to consider bankruptcy, given the amount of debt you’re carrying.

If you’re paying only the minimums on your credit cards, that monthly bill indicates you have close to $40,000 in credit card debt. Since you can’t cover your basic expenses, you’re probably adding to that debt pile every month. That needs to stop.

You don’t say why you aren’t receiving child support, but if the father isn’t dead or disabled he should be helping to support his kids. Your state has an enforcement agency that can help you. Child support enforcement is often part of a state’s social services department, although it may also be offered by the state attorney general or its revenue (tax) department.

One obvious, if painful, place to trim is private school tuition. If the school can’t offer you financial aid, you should consider placing your kids in the best public school you can manage.

What you don’t want to do is trim your retirement plan contribution. You’re probably getting a company match, which is free money you’ll need to sustain yourself in retirement.

In general, your “must have” expenses — shelter, transportation, food, utilities, insurance and minimum loan payments — should equal no more than 50% of your after-tax income. If your must-haves exceed that level, it will be tough to make ends meet, particularly if you’re trying to pay off debt and save for the future.

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Categories : Budgeting, Credit & Debt, Q&A

3 Comments

1

You’re a good mom! First and foremost!! Something has to give…kids will understand..I was there ..my kids said best Christmas and Thanksgiving were best with just us…my kids have learned to save and understand the importance of money. Best thing for them too understand life…simplify ..it’s hard but they will appreciate the little things.

2

Good job seeking help! That is always the first step in making things better. Have you considered selling your house and moving to an apt.? If you have equity you would then have a cushion for things you need. Without that cushion it’s really hard to get by because the unexpected always seems to happen sinking your farther in debt. You might still have to pay the $1700 you currently are for your shelter but you wouldn’t have to pay for any repairs that might rear their ugly head. Once your kids are out of school (in 12 yrs at the most) You can then use the tuition money to buy a new home if you feel the need for one then. Your kids might not understand why your roosting them now but when their adults they’ll thank you for not having to depend on them in your old age.

3

First, I would look at downsizing whatever vehicle has the $355 car loan. If this is a family of four, they should be easily able to use a standard, inexpensive 4-door car. The next place to consider is the private school tuition. And finally, I agree that the OP also needs to look at why she has $40,000 +/- debt and make sure that’s not an unaddressed ongoing problem.